If You Build It, Will They Come? The Competitiveness of US LNG in Overseas Markets

If You Build It, Will They Come? The Competitiveness of US LNG in Overseas Markets

The explosion of US shale has brought expectations of great change for US LNG trade, increasing the volume of flexible cargoes available to markets traditionally dominated by long-term contracts between buyers and sellers. However, new supplies from the United States, combined with new production from Australia and elsewhere, have set the LNG market up for a glut that threatens to depress prices.

In a report by the Center on Global Energy Policy, the authors assess the factors influencing the competitiveness of US LNG around the globe, whether capacity will be curtailed in the near to medium term for economic reasons and how competitiveness of US LNG may evolve in the medium term.

Key Findings From the Report:

Companies will likely make decisions about whether to utilize US LNG export capacity based solely on variable costs

The arbitrage window (on a variable cost basis) to export US LNG to the main importing regions remains open, but the margins have become very tight

Small changes in a number of variables can, at times, render US LNG exports uneconomic

Full utilization of US export capacity seems unlikely, especially if overseas spot prices remain as low as some forecasts suggest

Related Research

In collaboration with the King Abdullah Petroleum Studies and Research Center (KAPSARC) and the Fondazione Eni Enrico Mattei (FEEM), the Center on Global Energy Policy organized a workshop to discuss the potential demand for natural gas in the Eastern African region based on the development of resources in Mozambique and Tanzania and, potentially, Kenya.

On October 11–12, 2017, CGEP, in collaboration with Statoil’s Global Strategy and Business Development unit, hosted a workshop in Paris to explore the intersection of energy and geopolitics in oil and gas markets, in climate policy, and across a range of cross-cutting topics, such as national security and cybersecurity. This summary highlights the main points of discussion during the two-day workshop, which was conducted under the Chatham House Rule on a nonattribution basis.